A flagging economic growth rate is holding back corporate SA's performance, with only 205 of the 429 companies reviewed making it into the league of pre-tax profit over R30m. This is 21 fewer than last year.
The over-R30m group generated a total pre-tax profit of R194bn, a hefty R17,6bn or 8,3% down on the previous year's total of R211,6bn.
Most of the figures reviewed fell into two three-month periods; just over half the companies had year-ends between December 2000 and March 2001, and 47% had year-ends between June and September 2001. Throughout this extended period the pace of economic growth was in decline.
In the 12 months to March 2001, SA's nominal gross domestic product (GDP) grew by 11,3% and real, inflation-adjusted GDP by 2,8%. The real GDP growth rate in the 12 months to March 2000 was 3,3%.
In the 12 months to September 2001, growth came under further pressure, with nominal and real GDP increases of 8,1% and 1,9% respectively, compared with 3,4% real GDP growth in the 12 months to September 2000.
The fall in total pre-tax profits reveals only part of the story. Total pre-tax losses increased 69% from R4,8bn to R8,2bn. The number of companies in loss positions rose 25% from 85 to 106, or, scarily, almost one in four quoted companies.
On a net basis, after deducting losses, total pre-tax profits of all companies reviewed declined by R19,6bn or 9,5% to R187,1bn from the previous review period's R206,8bn.
As always, SA's corporate giants dominated the scene. The number of companies achieving pre-tax profits of more than R1bn increased from 35 to 38. A further 138 companies achieved profits of between R500m and R1bn while 138 produced profits of between R100m and R500m.
With a combined pre-tax profit of R56,2bn, the top five companies - Anglo American, Richemont, Sasol, BHP Billiton and Old Mutual - represented 29% of the total.
Adding the R36,9bn from the next-largest five - Anglo Platinum, Remgro, Nedcor, Impala Platinum and Standard Bank Corp - whisks the total to R93,1bn. This equals the total pre-tax profit of companies ranked 11th to 110th and 48% of total pre-tax profit produced by all 323 profitable listed companies.
Changes in the top 10 company ranks reflect the resurgence of SA's mining and resources companies. Occupying five of the top 10 positions, such companies produced total pre-tax profits of R52,3bn and made up 56% of the top 10 companies' total.
Anglo American's R15,4bn pre-tax profit ousted international luxury goods group Richemont from its leading position by a margin of R4,5bn. A 67% profit improvement from Sasol moved it from seventh to third position and a modest 8,6% improvement shifted BHP Billiton from fifth to fourth place.
But the biggest moves came from the platinum stocks. Adding R5,8bn (175%) to its pre-tax profit rocketed Anglo American Platinum from 19th to sixth place and an extra R3,9bn profit from Impala Platinum took it from 20th to ninth place.
SA's big four banks, Stanbic, Nedcor, Absa and FirstRand, held or improved their ranking positions. Total pre-tax profit from the four surged 47% to R22bn.
The biggest slide out of the top 10 came from IT group Comparex, whose pre-tax profits were down from R13,8bn to R445m, taking it from fourth to 62nd position. But whether Comparex should have ranked as high as it did last year is debatable, as R13,7bn (99%) of pre-tax profit came from the sale of European networking operations to Didata.
SA Breweries also slipped badly from eighth to 16th as its pre-tax profits almost halved from R6,2bn to R3,3bn. But this change from the previous year was due partly to inclusion of exceptional items.
Exceptional profits and losses, often of a capital nature, can distort pre-tax profit figures and result in an incomplete picture of a company's performance. A better indication of SAB's, excluding all exceptional items and discontinued operations, was the 15% pre-tax profit decline to US646m in the year to May 2001.
Similarly, Anglo American has undergone extensive restructuring involving sales of noncore operations. The result has been big figures for exceptional items, which in financial 2000, for example, included exceptional operating losses of $266m.
Excluding all exceptional items in financial 2000 shows Anglo American's pre-tax profit was up 36,5% to $3,85bn and, with the help of a weaker rand, up 61% to R29,3bn - 90% higher than the R15,4bn pre-tax profit figure that earned it top-ranking position.
Richemont's pre-tax profit, which plummeted 45% to R10,9bn, is equally illuminating. Excluding exceptional profits and with a 25% boost from the rand-euro exchange rate, it was up 19% to R3,4bn. This would earn Richemont a ranking of no better than 14th and propel Sasol into second position. Sasol's R10,6bn pre-tax profit was generated with no help from exceptional items.
IT group Datatec also received help from exceptional profits. These boosted what was an effective 50% higher pre-tax profit of R706m before exceptional items to a 234% higher R1,7bn.
Without R3,4bn exceptional profits, 18th-ranked MIH Holdings, which controls international and SA electronic media interests, would not have made it into the ranking tables at all. Neither would MIH's parent group, Naspers, which ranked 20th in the pre-tax profit table. Excluding exceptional profits, Naspers turned in a R2bn loss, four times higher than the previous year's R0,5bn loss.
By contrast, exceptional losses of $207m (R1,6bn) cost Sappi its R1bn pre-tax profit status and thumped it from 22nd to 75th place. Excluding exceptional losses, Sappi's pre-tax profit was 38% down at $354m. In rand terms, this translates into a 25% decline to R2,8bn, a level that would earn it a top 20 ranking.
Companies with a strong export bias are likely to outperform in 2002 as full benefits of the weaker rand flow through. There are also good indications that protection against import competition afforded by the weak rand is benefiting domestic manufacturers.
Construction companies also appear set for stronger growth as government's infrastructure development programme gathers pace. Less likely to show strong growth are consumer-orientated companies facing the combined onslaught of higher interest rates and inflation.